No liability can be enforced against surety liable for limited period

Punjab and Haryana High Court in Golden Rolls(P) Ltd CWP 5234/2013 dated 23-05-2013

Furnishing of bank guarantee in lieu of 25% deposit u/s 62(5) is not acceptable

Punjanb and Haryana High Court in Pearls Buildwell Infrastructure Limited CWP 11456/2013

Power to recall or review its order by adjudicating authority is not inherent power and must be specifically provided in the Act

Hanuman Rice Traders CWP 11398/2013  dated 22-05-2013
Followed Supreme Court in Kalabharti Advertisement 2010 9 SCC 437

Cenvat Credit on Tool Kits and first aid boxes provided by automobile manufacturer is allowable

Punjab and Haryana High Court in Honda Motorcycles and Scooters CEA 52/2012 dated 09-05-2013
Bajaj Auto Limited 88 ELT 355 and Bajaj Tempo Limited vs Commissioner of Central Excise followed

Penalty u/s 271(1)(c) can not be imposed for addition on basis of deeming fiction u/s 50C

CIT Vs. Madan Teatres Ltd., ITAT No. 62 of 2013, Date of decision: 14.05.2013, Calcutta High Cour

Expenditure on back up, support and maintenance of existing hardware and software is revenue in nature

CIT vs. Asahi India Safety Glass Limited (2011) 245 CTR 529 (Del.)

S.43B applies to employee contribution also

Kichha Sugar Company Limited (Uttarakhand HC)
Same view adopted in
AIMIL 321 ITR 508 (Del)
 Bharti Shipyard 132 ITD 53 (SB Mum)
Desh Rakshak Aushadhalya 313 ITR 140 (Utt.)
Lakhani India 324 ITR 73 (P&H)

ITAT Mumbai in LKP Securities has taken contrarry stand

Calculation of period of 12 months/36 months for capital gains

Bharti Gupta Ramola v. CIT (2012) 72 DTR 387/251 CTR 139 (Delhi)(High Court)

Interest Expenditure incurred before commencement of business is also allowable as revenue expenditure

Punjab and Haryana High Court in Vardhman Polytex ITA 55/2013 relying upon Supreme Court judgement in assessee's own case in Civil Appela 6438 of 2012 dated 12-09-2012 titled Vardhman Polytex vs CIT.
Supreme Court had relied upon its earlier judgement in case in Core Health Care Limited 298 ITR 194
Challapali Sugar Ltd 98 ITR 167 (SC) held not applicable

Depreciaiton allowable in hands of finance company acting like a lessor

PKF Finance Ltd 158/2002 dated 13-05-2013
Supreme Court decision in case of ICDS Ltd. vs. CIT 2013 3 SCC 541 followed:

Land although outside the specified distance from limits of one municipality but with in limits other municiplality is capital asset u/s 2(14)

CIT vs Smt Anjana Sehgal ITA 276/2004 decided on 01-03-2011
CIT vs Smt Neeru Aggarwal ITA 209/2012 decided on 29-04-2013
The followings factors are irrelevant to determine whether land is capital asset or not:
i) Land is situated in some other state while municipality is situated in some other state (As per Anajna Sehgal)

ii) Land is boyond specified limit from municipality in whose revenue records land appears while the land is in municipal limits or with in specidied distance from another municipality (whose revenue records do not cover that land in quastion) (As per Neeru Aggarwal)

Exemption and Deduction for Interest

Saving Bank Interest: Deduciton  up to Rs.10000 u/s 80TTA
Post officeSaving Bank Interest
Rs3500 exempt u/s 10(15)(i) vide Notificaiton No.SO 1296(E) dtd 3-6-11
Rs. 10000 deduction u/s 8OTTA

Post Office Cumulative Time Deposits Rules 1981
For Investment in five year time deposits there is deduction u/s 80C
Interest is exempt u/s 10(15)(i) vide Notification No. SO 607(E) dated 9-6-1989

Service Tax and Vat on Builders and Developers

Builders and Developers How the controversy arose

•         Supreme Court in case of K.Raheja Development Corporation (2005) 2 STT 178 SC which was a case on Karnataka General Sales Tax Act held that where developer was undertaking construction on behalf of prospective flat owners, it tantamounts to works contract and exigible to sales tax

•         In this case , the assessee had entered into development agreements with land owners. Developer to there after get the plan approved and after completion flats were to be handed over to those land owners who were to get undivided interest in the land also. There after owners to transfer flats to housing society. It was in this case that transaction was held to be works contract

•         On the basis of decision of K.Raheja Development Corporation , DG Service tax , Mumbai vide letter dated 16-02-2006 (withdrawn since 23-08-2007) sought to impose service tax on service part of transaction.

Service Tax on Works Contract

Service Portion in Works Contract

•         Work Contract vs. Works Contract

•         Works contract has been defined in section 65B(54) of the Act as a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, maintenance (substituting “improvement”), repair, renovation, alteration of any movable or immovable property (substituting “building or structure on land”) or for carrying out any other similar activity or a part thereof in relation to any movable or immovable property (substituting “building or structure on land”). (Substitution made in  Finance Bill 2012 by Lok Sabha)

No penalty can be levied for inadvertent depreciation mistake

Somany Evergreen Knits Limited (Bom HC)
Other decisions on non levy of penalty for inadvertent mistake:
Benet Colemn(Bom)
PWC 348 ITR 306(SC)
Sania Mirza(AP)
Societex((Delhi)
Hans Christian Gass(Bom)

Vat issues relating to rice shellers

1.Whether purchase tax can be levied on purchase of paddy which goes into production of rice meant for export and domestically sold  by products such as broken rice, husk etc.
As per Article section 5(3), section 15(ca) of Central Sales Tax Act and section 84 of Punjab Vat Act no tax can be collected on purchase of paddy for the purpose of export of rice.
As per decision of Punjab and Haryana High court on 14-01-2011 reported in 16 STM 727 in case of KRBL" It can not be held that irrespective of legislative competence of the legislature, tax could be recovered leaving the remedy of refund being sought, Tax can be levied only by authority of law and the State legislature can recover tax only if it is with in its legislative competence. In case tax is evaded in any manner, the authorities can act according to statutory provisions dealing with evasion of tax".
Hence no purchase tax can be levied on purchase of paddy which goes into production of rice meant for export
However as per Rule 21(2A) inserted w.e.f. 08-11-2010, if goods manufactured  are sold at price lower than cost price, the ITC shall be reversed on excess of cost price over sale price. Since price of paddy is more than sale price of by products, the department might invoke Rule 21(2A).

However as per High Court of Allahabad decision in case of KRBL rendered on 18-01-2010 ITA 1666 of 2010 ".......Learned Counsel for the assessee is justified in saying that no raw material was ever purchased for the manufacture of any waste product or any bye product. The assessee has established its unit for the manufacture of rice and used its entire raw material for the manufacture of rice........."

Therefore Rule 21(2A) can not be invoked.

Hence no purchase tax can be levied on purchase of paddy which goes into production domestically sold  by products such as broken rice, husk etc.


2.Whether purchase tax is required to be reversed on rice manufactured from paddy and sold in course of interstate trade or commerce as per section 19(5) of Punjab Vat Act 2005
As per section 19(5)
"Input Tax credit on the goods specified in Schedule H or the products manufactured therefrom, when sold in the course of inter state trade or commerce shall be available only to the extent of Central Sales Tax chargeable under Central Sales Tax Act 1956"

If we substitute the words " paddy " and rice it goes as under:

Input Tax credit on paddy when sold in the course of inter state trade or commerce shall be available only to the extent of Central Sales Tax chargeable under Central Sales Tax Act 1956

Input Tax credit on rice manufactured from paddy, when sold in the course of inter state trade or commerce shall be available only to the extent of Central Sales Tax chargeable under Central Sales Tax Act 1956.

Further as per section 15(c) of CST where tax on purchase of paddy is levied under state law then tax leviable on rice procured out of such paddy shall be reduced by amount of tax levied on paddy.
Section 15(c) doen not talk about any partial adjustment.

Hence no ITC should be reversed on rice manufactured from paddy and sold in course of interstate trade or commerce.

3. Whether purchase tax can be levied on closing stock at the end of financial year 
Taxable event under Punjab Vat Act is sale or purchase of goods hence no tax can be levied on closing stock.
Further in case of exporters the stock of paddy gets exported , hence no purchase tax can be levied on paddy meant for procurement of rice for export.

Sale consideration invested in construction of new house which remains incomplete after 3 years from date of transfer , still s. 54 F exemption shall be allowed

Smt. Usha Vaid ITAT AMRITSAR BENCH IT Appeal No. 98 (Asr.) of 2011 July 27, 2012
CIT v. Sardarmal Kothari [2008] 302 ITR 286

Mrs. Seetha Subramanian v. Asstt. CIT [1996] 59 ITD 94

Smt. Ranjit Sandhu v. Dy. CIT [2010] 133 TTJ 46 (Chd)(UO).

S.54F exemption is available on house constructed on agricultural land

Om Prakash Goyal IT APPEAL NO. 647 (JP) OF 2011 FEBRUARY 2, 2012 ITAT JAIPUR

S.54F exemption is available for house outside India also

Vinay Mishra (Banglore Tribunal) 12-10-2012 ITA 895/Bang/2012
Mrs. Prema P. Shah v. ITO [2006] 100 ITD 60 (Mum.
ITO v. Dr. Girish M. Shah in I. T. A. No. 3582/Mum/2009, dated 19-2-2010 

Once an assessee objects to stamp duty value u/s 50C AO has to refer the case for valuaiton and is bound by the report of DVO

ATE Enterprises P Ltd. IT APPEAL NOs. 2873 & 2874 (MUM.) OF 2011 SEPTEMBER 7, 2012
Smt. T.V. Nagasena IT Appeal No. 296 (Bang.) of 2011 May 31, 2012
Dr. Indra Swaroop Bhatnagar Allahabad High Court IT APPEAL NO. 97 OF 2008 SEPTEMBER 29, 2011
M. C. Khunnah v. Union of India [1979] 118 ITR 414 (All)
CWT v. Dr. H. Rahman [1991] 189 ITR 307
Cental Board of Direct Taxes Circular No. 8 of 2002, dated August 27, 2002 (see [2002] 258 ITR (St.) 13)

Value of Entire land appurtenant to building can not be considered for s.54/54F

HIGH COURT OF KERALA

Smt. Asha George

v.

Income-tax Officer, Ward 2(1), Thrissur

IT APPEAL NO. 114 OF 2012

Date of Pronouncement – 16.01.2013

Minimum 30% marks for each subject and minimum 50% in aggregate to be obtained for passing CPT as per ICAI announcement dated 20-02-2013

Foreign Exchange fluctuation gain on share Capital raised in foreign country and repatriated to India on need basis for working capital requirement not to be treated revenue receipt

CIT vs. Jagatjit Industries Ltd 2011 337 ITR 21 (Delhi)
Delhi High Court observed that manner of utilization was approved by Ministry of Finance. High Court further held that capital raised whether in or outside India can be utilized both for acquiring fixed assets and to meet other expenses of organization i.e. working capital. For determining the nature of receipts due consideration should be given to the source of funds and not to the ultimate use of funds. Entire gain has to be treated as capital receipt as source of fund in this case is capital in future

Exemption under s.54/54F is available for several units of residential house

CIT Vs. Gita Duggal, ITA No. 1237/2011, Judgment delivered on: 21.02.2013, High Court of Delhi.
In this case asessee entered into development agreement and was to get multiple units. AO added cost of construction of residential units to sale consideration but allowed exemption under 54 for one unit only. However court allowed exmption for multiple units

Mere non-payment of duties is not collusion or willful misstatement or suppression of facts.

[Supreme Court in the case of M/s Uniworth Textiles Ltd vs Commissioner of Central Excise, Raipur (2013-TIOL-13-SC-CUS)].

Assessee can not be asked to prove source of source or origin of origin

Allahabad High Court Zafa Ahmad & Co 10-01-2013 ITA 71/2002
relied upon a Division Bench decision of this Court in the case of Anil Rice Mills v. CIT [2006] 282 ITR 236 for the proposition that only the creditworthiness of the depositor has to be established

Brand Creation Expenditure is deferred revenue Expenditure

30 taxmann.com 323( Mum Tri) Fine Jewellery 31-7-2012

Changes in TDS Procedures vide Notification 11/2013 dated 19-02-2013

Changes in Rule 31A for TDS returns
1. TDS returns in Form 24Q,26Q ,27Q can be furnished under digital signatures also but this is optional only
2. Refund claims of TDS can be made in Form 26B. Refunds to be claimed under digital signatures only.
3. As per section 197A(1F) inserted by Finance Act 2012 w.e.f. 01-07-2012, no deduction of tax shall be   made from specified payment to notified institutions etc.Now information of such institutions shall be required to be given in TDS returns along with information already being furnished in TDS return.
4. Director general to frame procedures for TDS refund also along with procedures for TDS returns already   being framed.

There can be no presumption of gross receipts being cum service tax unless other wise proved by assessee

30 taxmann.com 239 Mahasha Enterprise 09-01-2013

No disallowance of 75% abatement in the hands of service recepient in case of GTA services on the pretext of not proving that Cenvat Credit not claimed by GTA unless records of GTA are verified by department

30 Taxmann.com 241 Delhi Cestat Ahluwalia Contracts I Ltd 08-01-2013

Depreciation can not be disallowed where there is no change in facts and circumstances of the case as compared to last year

Depreciation can not be disallowed where there is no change in facts and circumstances of the case as compared to last year. In this case manufacturing activity was closed in last year also and depreciation was allowed . However during the year under consideration the department wants to disallow on the ground of assets not being used for business purposes. However depreciation allowed by Tribunal on the grounds that depreciation was accepted in last year
30 Taxmann.com 221 Delhi Tribunal Hindustan Fertilizer

Non-payment of interest on loan taken from a co-operative bank would not attract provisions of section 43B because co operative bank is not scheduled bank

[2013] 30 taxmann.com 203 (Bombay) Upendra T. Kapadia OCTOBER 30, 2012

Non-consideration of various issues such as date of acquisition of bonus shares, expenditure incurred on earning exempt income etc., made assessment order erroneous and, thus, Commissioner was justified in setting aside same in exercise of his power under section 263

[2013] 30 taxmann.com 57 (Hyderabad - Trib.) Ninestar Enterprises (P.) Ltd.DECEMBER 31, 2012

Where main activities of Improvment trust were to purchase undeveloped land and to sell off same after development, activities of assessee were in nature of trade and Commissioner had rightly cancelled registration already granted under section 12AA to it

[2013] 30 taxmann.com 58 (Amritsar - Trib.) Improvement Trust DECEMBER 18, 2012

In case of a charitable trust, if objects are of general public utility and receipts from those objects exceed Rs. 10 lakh, in such a case Assessing Officer can deny exemption under sections 11 and 12 but can not cancel registration of trust granted under section 12A

[2013] 30 taxmann.com 134 (Chennai - Trib.) Madras Motor Sports Club DECEMBER 21, 2012

Where simply an equipment or sophisticated machine or standard facility is provided albeit developed or manufactured with the usage of technology, such a user cannot be characterized as providing technical services.

[2013] 30 taxmann.com 200 (Mumbai - Trib.) Siemens Ltd. FEBRUARY 12, 2013

Where particular technology was made available to assessee exclusively and assessee had right over intellectual property, agreement with supplier was not only for purchase of machine but also for acquiring technical know-how

[2013] 30 taxmann.com 176 (Mumbai - Trib.) Bajaj Holdings & Investments Ltd.JANUARY 16, 2013

Even though assessee was engaged in purchase and sale of properties, still he could purchase and hold some plots as capital asset and claim benefit of deduction under section 54F in respect of sale of those plots

[2013] 30 taxmann.com 202 (Jodhpur - Trib.) Sunil Bhandari NOVEMBER 30, 2012

Deposit of money in fixed deposit cannot be construed as deposit in capital gain bond for claiming exemption under section 54EC

[2013] 30 taxmann.com 130 (Cochin - Trib.) R. Vidhyadharan DECEMBER 21, 2012

Guideline of land value fixed by sub-registrar is only a guideline value to ascertain market value of land for collection of stamp duties and it cannot be a sole basis for fixing fair market value as on 1-4-1981

[2013] 30 taxmann.com 130 (Cochin - Trib.) R. Vidhyadharan DECEMBER 21, 2012

For registration of a newly registered trust under section 12AA, objects for which it was formed should be examined and not its activities, which is yet to be commenced

2013] 30 taxmann.com 168 (Chennai - Trib.) A.V.S. Educational Trust JANUARY 18, 2013

Section 14A is not applicable in respect of share application money

[2013] 30 taxmann.com 169 (Mumbai - Trib.) Rainy Investments (P.) Ltd. JANUARY 16, 2013

Mere providing of machinery on hire without any manpower cannot be termed as carrying out of any work by plant and machinery owners and, thus, no tax is required to be deducted under section 194C

[2013] 30 taxmann.com 235 (Hyderabad - Trib.)
JANUARY 18, 2013
Covered by 194I w.e.f.13-07-2006

Power of Designated Officer Conferred upon Inspectors

Notification dated 15-01-2013. Powers conferred for Ist January  2013 to 31st Dec 2013.
Earlier Notifications issued on 16-5-2011 and 22-12-2011. Powers under following sections only conferred:

Under  sections  I l, 13, 14, 26 to 32,36, 38 to 41,45 to 49,52 to 60,66,76,77 and 83
Hence power under section 51 can not be exercised by Inspectors

Difference in figures of income as per TDS certificates and in return of income does not necessarily lead of escapement of income :

[2013] 30 taxmann.com 54 (Kolkata - Trib.)

IN THE ITAT KOLKATA BENCH 'B'

Meheria Reid & Co.

28-12-2012

CBEC Circular dated 01-01-2013 on Recovery of Demand held invalid by Mumbai High Court

WRIT PETITION NO.878 OF 2013

Larsen & Toubro Limited & Anr Vs.The Union of India and others    . .

Disposal of appeal by High Court by merely saying that case was not a fit case to be interfered with is not proper; High Court must discuss issues raised by parties and dispose of matter with a reasoned order

[2013] 30 taxmann.com 8 (SC)

SUPREME COURT OF INDIA

Commissioner of Central Excise, Allahabad

v.

U.P. State Sugar Corpn. Ltd.*

RULES OF INTERPRETAITON

Interpretation of Statutes – Importance of Subject:

For understanding the provisions of a statute, knowledge to apply the ‘correct’ interpretation, is an essential pre-requisite.

In the case of taxing statutes, as in different type of statutes, there are certain bedrock principles on which the interpretation or construction of the particular statute is done by the Courts and Tribunals; and the tax practitioners are required to have the knowledge of these basics in their catalogue to understand the statute and implications of its provisions. Some important aspects relating to‘Interpretation’ of Taxing Statutes are dealt herein.

Revenue Authorities of State can not refuse to follow the jurisdictional HIgh Court on the Grounds that matter of some other HIgh Court is pending before the Supreme Court

GM Mittal Stainless Steel P Ltd 263 ITR 255 (SC)

54F benefit is available on capital Gain calculated u/s 50C on value exceeding actual consideration

Raj Babbar vs ITO ITA 6497/MUM/2011 DECIDED ON 02-01-2013